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Economy

Don’t Panic: A sign of light

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Frugal Scholar had a bit of a meltdown as rumors of 25 percent cutbacks swirled through her campus. This kind of talk is unnerving, especially since we know that when layoffs loom, the talk that precedes them often comes to pass.

There’s certainly no real evidence that the economy’s alleged recovery is affecting the average Jane and Joe at the state level. Here in Arizona, the state and cities are at the point of canning firefighters and police, and we’re told that unless we vote in the proposed tax hike—which we probably won’t, this being a Kill-the-Beast sort of place—schools will be shut down and cutbacks will be Draconian. Real estate is still worthless, and while the media yelp enthusiastically over openings at this and that megacorporation, they’re all minimum-wage burger-flipping, shelf-stocking, and housekeeping jobs.

But…some individual stories offer a glimmer of  hope. Tina, a.k.a. The Kid, landed herself an editor’s job in the College of Business out at the Great Desert University. Pay isn’t great, but it’s a helluva lot better than the College of Liberal Arts and Sciences was paying her. A paycheck could fall way short of that and still be an improvement: she earned more in five hours waiting tables at Applebee’s than we paid her in a week. What she’s earning now at least apes a normal wage. And, because the journal has private funding, she will get occasional bonuses that, mirabilis, will not be paid through the rapacious state of Arizona.

Meanwhile, she had a bunch of freelance gigs pending, all of which had been sitting there for quite some time and none of which were doing anything. She had given up on them, figuring it was all so  much hot air.

Now, however, the largest of those putative clients wants her to manage a textbook project. Pay: $39,000, more than the enhanced new salary at GDU. Add that contract to the day job, Applebee’s, and her other contracts and, says she, in 2010 she could rack up as much as $100,000!

Not bad for a liberal arts graduate. Not bad for cobbling together a living from a bunch of different sources.

She’s now considering farming out this work to her fellow editorialists, keeping a finder’s fee for herself. This strategy will bring a few bucks for her and keep her clients on the string, so if the job falls through for any reason (it is ASU, after all, and ASU is the State of Arizona, an institution in shambles), she’ll still have the freelance work to fall back on.

Another friend was offered ten grand to do a book project but turned it down because she has enough work, thank you.

So, the post-layoff world is not altogether bleak. It is possible to turn up work here and there (some of it paid in cash), and my experience is confirming SDXB’s assurance that it doesn’t cost anything like what you expect to live in Bumhood. I’m now not only not sorry GDU laid me off, I’m glad of it! Wouldn’t go back to work full-time on a bet.

Property tax statement arrives

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The county has dropped its estimate of my house’s 2011 value by $19,500. That’s down $62,300 from the 2009 valuation.

In theory, this should provide some tax relief. In reality, though, it won’t: Maricopa County is going broke, like all the other municipalities in the state, and so the county supervisors intend to raise property taxes by a walloping 10 percent. They also intend to take away the 50 percent tax break on historic homes that has led to the vibrant restoration of the cultural district and urban neighborhoods flanking Central Avenue as it passes through the once-decrepit downtown area.

Out of work, Mr. Taxpayer? Broke? Living out of a cardboard box? Lie still there on the ground so we can aim another sharp kick to your kidneys.

The county offers a tax freeze for people who are over 65 and have a gross income of around $32,000 or less. I realized I could qualify for that…until I saw the form you have to fill out. What the county deems to be your 2010 income bears no relation with how much you have in 2010. It’s based on your 2009, 2008, and 2007 gross income figures. Thus after you lose your job on December 31, 2009, as one of us has, your penurious 2010 income is irrelevant.

Let us give you another swift kick, Ms. Taxpayer!

So, chances are my time in the present abode is limited. Last year’s taxes were a stretch, and that was when I was employed and self-escrowing $325 a month to cover the various annual homeowning charges. If taxes rise now that I have no credible income, I won’t be able to stay in my home without drawing a lot more down out of my retirement savings. And that may be contraindicated.

Good news for one of the young people

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My late, great associate editor and de facto business partner Tina has a good shot at a full-time editorial position at the Great Desert University’s business college. It’s incredibly good news. The presumptive boss managed to extract an assistant editor’s line from the university despite the dire economic conditions. It means this is someone with enough political clout to get money when no money is there.

I just spoke to the woman and rhapsodized about the kid’s overall genius and entrepreneurial touch. She sounded impressed. Let’s just hope she’s impressed enough to hire!

🙂

Here come the new taxes…

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The City of Phoenix, strapped to the point of having to lay off firefighters and police officers, has decided to institute a sales tax on food sold in grocery stores, which we’ve never had before. The new bite will be 2 percent, added on top of the existing 8.3 percent tax we pay on every other retail item.

This will raise our retail tax, effectively, to 10.3 percent.

Doesn’t stop there, though: the state is about to float a referendum asking taxpayers to approve a “temporary” (har har!) 3 percent sales tax. This would raise our extra gouge in the grocery store to 15.3 percent!!!!

Holy mackerel.

It could pose a bit of a problem for me. Depending on how you look at the post-canning finances, over the course of a year, either I have almost no wriggle room or I have a fair amount of budgetary play. Because I don’t know which and will not know until a year passes and I see what happens, the only responsible tack I can take is to assume the worst: a very tight budget, indeed. In that case, an abrupt jump in costs for food and daily necessities could be a headache of marathon migraine proportions.

The only way for me to cope with an increase like that will be to ask SDXB to buy my food and household goods at the commissary and base exchange, where he pays no taxes.

This will be extremely inconvenient, because it will mean a) I will have to wait on his convenience, and he only shops about once a month; and b) I’ll have to drive way to Hell and gone out to Sun City to pick up my groceries. There’s also the issue that SDXB, being the extremely manly sort, doesn’t pay any excess of attention to what the Little Woman wants. I can ask him to get X and only X, and I’ll end up with Y because he decides to substitute something he thinks is just as good or to buy me something that I explicitly say I don’t want. He doesn’t see any reason, for example, why anyone needs soft toilet paper and absorbent paper towels, and so when I ask for Charmin’ and Viva I get cheap TP in short rolls with the texture of newsprint and cheap paper towels perforated every six inches that are about as absorbent as wax paper.

While he can get me into the BX if he’s not dragging New Girlfriend around, he can only take a certifiable wife into the commissary. Fortunately, NG has a place in Colorado and so is gone a lot. Also, these serial girlfriends never last very long, so I don’t expect she’ll be barring the door to the BX forever. In theory, I could go out to the base with him and buy household goods in the BX and then send him to the commissary to pick up food.

But what a pain in the tuchus!

Real estate prices, in progress

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On my old street, just two blocks north of the present palatial dwelling, five houses have gone up for sale. One is my favorite model in this development, and it’s offered through the dominant Realtor in our area.

She was having an open house yesterday, so I dropped by to say hello and check out the place…and, of course, to find out how much she thought she could get for it.

It is a beautiful house. She said the sellers are the original owners, but it sure didn’t have that stale original-owner look to it. All the cabinetry has been replaced with high-quality new cabinets, the expansive countertops (this model has a huge kitchen) remade in granite, the floors paved with a particularly handsome hard-fired tile. The yard is very attractive; a bay window was added to the breakfast room, a new master bedroom extends into the huge backyard, and the pool has been “dry-docked”; i.e., put to sleep and covered with a large, expensive-looking deck. All in all, to die for.

Asking price is $285,000. The Realtor said that works out to $117 per square foot.

Out comes the calculator!

That model was SDXB’s. Without the extra bedroom, his house was 2,100 square feet. In the same year I bought my present home, he sold his for $229,00. That was just at the start of the bubble, long before anyone realized how fast prices were about to run up.

At $117 a square foot, his house would theoretically be worth $245,700 today. Not bad.

My house, however, would only be worth $217,620; I paid $232,000 for it. So it’s still down $14,380 off its proto-bubble price. Better than it was—for a while, the house’s value had dropped to around $180,000. Today Zillow prices it at $236,000, but IMHO a house, like any object, is worth what someone will pay for it. If our Realtor’s estimate is right (she does tend to underprice, but she’s been around for a long time), then at a 3% per year increase, the house’s value will come back to what I paid for it in a little over two years.

Modestly hopeful, I think. Maybe.

Recovery? Will even part-time work be there in 2011?

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The county community college district continues to brace for further budget cuts. Enrollment is up 11 percent, since people tend to go back to school when they’re out of work. But that notwithstanding, the state and the counties don’t have enough money to fund basic services. Like education.

By way of enlightenment, we are told by the college’s interim president:

Since FY07 sales tax collections have declined 22%, and personal income tax collections have declined 38%. And since 2004, 144,000 new students have entered the K – 12 system and 475,000 new members have joined AHCCS. On top of this, since 2007, the State has lost 280,000 jobs.

AHCSS is Arizona’s answer to Medicaid; you have to be destitute to qualify. Think of that: well over a quarter of a million jobs lost; almost half a million newly poor.

The state government lives largely on sales tax, which adds about 10 percent to every purchase you make, except for most foods. And except for gasoline and booze: those are even more heavily taxed. Income taxes here are relatively low, but when you add up all the small bites that come from all directions, taxation in general is fairly high. Thus when sales taxes drop by a fifth, that takes away a substantial part of the state’s operating budget, and the loss of almost three hundred thousand salaries since 2007 sure doesn’t help.

About $45 million of the Maricopa County Community College District’s funding comes from the state; that’s about 8 percent. At this point, no one knows what the effect on the district will be. The interim president, who has been attending talks on this issue for the past several days, reports:

Over the last three days, I’ve learned of a range of possibilities including: the district being held harmless (in terms of any reductions) for FY10 and FY11 to the other extreme that if new revenue is not generated (through the planned special election in May), MCCD’s reduction could be as much as $22.5 million.

The “planned special election” asks voters to decide whether taxes should be temporarily increased. Well…all very nice, but if no one has an income and no one’s buying anything, there’s nothing to tax. Also, of course, Arizonans like all Americans know there’s no such thing as a “temporary” tax increase. Once a new tax is in place, it will stay in place. So it’s highly unlikely that this referendum will succeed. They’re also talking about putting a sales tax on food, which apparently does not require a vote of the citizens; that will jack up everyone’s basic survival budget, a politick move, indeed, with hundreds of thousands of people out of work.

So…IMHO, it remains to be seen whether this part-time job I’ve picked up, teaching adjunct at the community colleges, is going to last. Although something like 80 percent of the district’s faculty is part-time, most full-time faculty are tenured. It’s difficult to get rid of tenured full-timers; nothing to get rid of adjuncts. A huge budget cut will result in cuts in the number of classes, increases in class size, and elimination of part-time positions.

The stock market, if no one has noticed, has entered another slow slide. We’re headed back into the 9000s, from what I can tell. If the market doesn’t stay above 10,000 and continue to climb modestly through 2010, my chances of recovering a respectable amount of the money lost in the Bush crash are nil.

It doesn’t bode well.